Supply. There are currently 18.9 million Bitcoin in the universe. It will take another 100 years for the remaining 2.1 million Bitcoin to be mined from the internet. Which means in your lifetime there will only ever be about 20 million of these things in existence.

Demand. Over the last five years, the supply hasn’t really changed that much. But demand really has. The price has increased from about $1,000 per Bitcoin to about $50,000. And the total value (market cap) of Bitcoin has grown from about $15 billion to $1 trillion over the same time period.

Human behavior. Human behavior is driven by incentives. And when those incentives involve money, it turns humans into computer programs. They will do exactly what’s required to protect and grow that money. Investors in Bitcoin cross all geographies, age, culture, religion, and financial sophistication. All that’s required is an internet access device, and an internet connection. Large institutions and many people in the technology industry have invested in Bitcoin. It really doesn’t matter why. All that matters is the financial, technology, and future generational “builders” have a direct monetary incentive to see Bitcoin be successful. At $1 trillion dollars of value, it’s one of the most valuable “companies in the world”.

Collectors. Because Bitcoin is relatively rare, because it is a store of value, and because it can be exchanged for other things of value around the world 24x7x365, there are a variety of collectors who would do whatever they can to collect as much Bitcoin as they can.

Non-zero value. People have lost access to their Bitcoin, which means even if they wanted to, they cannot sell it. As such, there is no way for any human or machine on the planet to collect all the Bitcoin. And it also means it can’t be sold to drive the price down to $0. This doesn’t even take into account the people with incentives in Bitcoin that, if the market crashed all the way to $1, wouldn’t immediately invest a large amount of money into Bitcoin and collect as much as they could, thereby driving the price back up.

Loans. There’s a simple trick the wealthy use for tax planning purposes. The invest their money in appreciating assets like stocks and Bitcoin. Instead of selling those assets to get cash to pay for expenses in their life (e.g., a house), they take out a loan with a bank using those assets as collateral. Thus, the assets continue compounding, they continue to earn money, and pay off the debt in the future. Or sell some of the gains in the future to pay down the debt. The trick is earning a return at a higher percentage than the debt rate.

Conclusion. Collect as much Bitcoin as you can because it has a limited supply and at some point it will not be available to trade any longer. It will become rarer and rarer making it nearly impossible to find a willing seller. Take out a loan for immediate cash needs with Bitcoin as collateral. Should your situation get dire, you can always sell the Bitcoin to one of the ravenous buyers. Put the Bitcoin into a trust in South Dakota. Add your family as beneficiaries and pass it down over generations. Don’t unnecessarily stop the compounding.

Risks. People and machines no longer want to collect or use Bitcoin, or no longer value it at all. Everyone who was a believer collectively agrees it’s not worthwhile any longer. The power law and category king theory does not continue to hold in this one industry.

--Sean

Disclaimer. I’m not a registered investment advisor, don’t have a CFA (though I sat for the first test), I’m not a CPA or an attorney. As such, please do not consider this investment advice.

Supply. There are currently 18.9 million Bitcoin in the universe. It will take another 100 years for the remaining 2.1 million Bitcoin to be mined from the internet. Which means in your lifetime there will only ever be about 20 million of these things in existence.

Demand. Over the last five years, the supply hasn’t really changed that much. But demand really has. The price has increased from about $1,000 per Bitcoin to about $50,000. And the total value (market cap) of Bitcoin has grown from about $15 billion to $1 trillion over the same time period.

Human behavior. Human behavior is driven by incentives. And when those incentives involve money, it turns humans into computer programs. They will do exactly what’s required to protect and grow that money. Investors in Bitcoin cross all geographies, age, culture, religion, and financial sophistication. All that’s required is an internet access device, and an internet connection. Large institutions and many people in the technology industry have invested in Bitcoin. It really doesn’t matter why. All that matters is the financial, technology, and future generational “builders” have a direct monetary incentive to see Bitcoin be successful. At $1 trillion dollars of value, it’s one of the most valuable “companies in the world”.

Collectors. Because Bitcoin is relatively rare, because it is a store of value, and because it can be exchanged for other things of value around the world 24x7x365, there are a variety of collectors who would do whatever they can to collect as much Bitcoin as they can.

Non-zero value. People have lost access to their Bitcoin, which means even if they wanted to, they cannot sell it. As such, there is no way for any human or machine on the planet to collect all the Bitcoin. And it also means it can’t be sold to drive the price down to $0. This doesn’t even take into account the people with incentives in Bitcoin that, if the market crashed all the way to $1, wouldn’t immediately invest a large amount of money into Bitcoin and collect as much as they could, thereby driving the price back up.

Loans. There’s a simple trick the wealthy use for tax planning purposes. The invest their money in appreciating assets like stocks and Bitcoin. Instead of selling those assets to get cash to pay for expenses in their life (e.g., a house), they take out a loan with a bank using those assets as collateral. Thus, the assets continue compounding, they continue to earn money, and pay off the debt in the future. Or sell some of the gains in the future to pay down the debt. The trick is earning a return at a higher percentage than the debt rate.

Conclusion. Collect as much Bitcoin as you can because it has a limited supply and at some point it will not be available to trade any longer. It will become rarer and rarer making it nearly impossible to find a willing seller. Take out a loan for immediate cash needs with Bitcoin as collateral. Should your situation get dire, you can always sell the Bitcoin to one of the ravenous buyers. Put the Bitcoin into a trust in South Dakota. Add your family as beneficiaries and pass it down over generations. Don’t unnecessarily stop the compounding.

Risks. People and machines no longer want to collect or use Bitcoin, or no longer value it at all. Everyone who was a believer collectively agrees it’s not worthwhile any longer. The power law and category king theory does not continue to hold in this one industry.

--Sean

Disclaimer. I’m not a registered investment advisor, don’t have a CFA (though I sat for the first test), I’m not a CPA or an attorney. As such, please do not consider this investment advice.